287. Hoopers! Hoopers! Hoopers!

As CEO of Microsoft, Steve Ballmer was famous for over-the-top enthusiasm. Now he's brought that same passion to the N. B. A. -- and to a pet project called USAFacts, which performs a sort of fiscal colonoscopy on the American government.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

  Freakonomics Radio is sponsored by PNC Bank. Boring. Great word, bad rep. Yet, time and time again, here at Freakonomics, we find that when something culture-changing happens, boring things like calculations and careful planning are usually behind it. Which begs the question, why not apply it to other aspects of life? Like banking, for example? Well, PNC Bank did, since its inception, proving time and again that the best banking strategy isn't the exciting type, but the steady, reliable, definitely-not-yolo type. PNC Bank: brilliantly boring since 1865. Brilliantly boring since 1865 is a registered mark of the PNC Financial Services Group, Inc. PNC Bank, National Association, Member FDIC.

• 0:48Stephen J. Dubner?

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• 1:19Stephen J. Dubner?

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• 2:09Stephen J. Dubner?

  Freakonomics Radio is sponsored by ChatGPT. ChatGPT Work is a new way to work in ChatGPT. ChatGPT Work can pull info from across your apps and connect to your tools to help you create finished work. You can even automate work in ChatGPT with the Scheduled Tasks feature, and the whole time, you stay in control. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting Work Mode, available on Plus and Pro plans.

• 2:46Stephen J. Dubner?

  So I have read that you're worth an estimated, well, estimated, I don't know, $31.3 billion. Does that sound about right? Do you have any idea?

• 2:54Speaker 01

  I've read the estimates.

• 2:57Speaker 01

  I don't comment, but suffice it to say, we've read the same publications.

• 3:06Stephen J. Dubner?

  Steve Ballmer was the CEO of Microsoft from 2000 to 2014. He was paid handsomely, but not anywhere near $30 billion worth of handsome. That came from a quirky deal that dates back to when he started at Microsoft. He joined in 1980 as the 30th employee, starting salary $50,000, but with a healthy profit share. And when that profit share became, from the company's perspective, too healthy, it was converted into stock ownership. The result? Ballmer was awarded 8% of the company's stock, the same share as all other Microsoft employees combined, who weren't named Bill Gates and Paul Allen.

• 3:52Stephen J. Dubner?

  As far as I can tell, you're the largest owner of Microsoft shares in the world since Bill Gates and Paul Allen have both sold off more over the years. And that looks like a pretty awesome decision. The share price as we speak today is around $69, all time high, from what I can tell. Why'd you stay in?

• 4:12Speaker 01

  Well, I didn't basically believe in selling. When I was CEO of Microsoft... I thought, if I'm selling shares, I'm not showing commitment to the work that I'm doing. I certainly had already sold enough over the years that nobody could say I was ever going to go hungry. But if you're running a company, you have to be bought in. And if you're not bought into what you're doing, it's not okay.

• 4:33Stephen J. Dubner?

  Ballmer recently dipped into his fortune to launch a project he's very passionate about. Of course, he's pretty passionate about everything. Here he is at a Microsoft event in the year 2000.

• 4:48Stephen J. Dubner?

  The new project is a website called USA Facts. It's a sort of fiscal colonoscopy of the American government.

• 4:56Speaker 01

  You know, if I'm a citizen, I don't want to know just where the government got its money, from whom, and where it's been. But is it working at all? Or at least, what activity is it generating?

• 5:06Stephen J. Dubner?

  So far, this project has cost Ballmer about $10 million, which is not nothing, although peeling $10 million off a $30 billion wad is the normal person equivalent of ordering a latte instead of a coffee. But don't worry, Ballmer has found another, more costly passion.

• 5:26Stephen J. Dubner?

  He has time for these passions because he no longer confronts the daily headaches of running the world's biggest software company. Headaches like the latest cyber attack that hit computers running Microsoft's Windows OS.

• 5:39Speaker 02

  Here's what you need to know about the ransomware that's been dubbed Wanna Cry. All the files in your computer and demands $300 in Bitcoin.

• 5:46Stephen J. Dubner?

  But again, not Steve Ballmer's headache anymore. Nor does he have to answer anymore for why Microsoft missed the rise of the smartphone. Although, if you ask him, he will answer.

• 5:56Speaker 01

  We did not take the right path.

• 5:58Stephen J. Dubner?

  All that and much more from one of the most dynamic businessmen in recent memory.

• 6:16Speaker 03

  From WNYC Studios, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.

• 6:31Stephen J. Dubner?

  Steve Ballmer dropped out of graduate school at Stanford to join Microsoft. Before that, he graduated from Harvard, that's where he met Bill Gates. Ballmer's degree was in applied mathematics, but he wasn't always good at math. His father worked at Ford in Detroit, and when Steve was eight, the family was transferred to Europe.

• 6:48Speaker 01

  I spent about a month in the second grade in Europe, and the math teacher told my parents, "This boy is not good at numbers. He's going to fail in third grade." I will say that was the initial clarion call for me to focus on numbers and get good.

• 7:04Stephen J. Dubner?

  He did get good. In fact, by high school, he got hooked on math.

• 7:08Speaker 01

  I wanted to go to college. I wanted to be a math or physics major. I love numbers. And what I learned was, numbers tell great stories. At least for me, and there's a certain set of people who can see it that way. If you want to paint the picture of how big and how small and how things fit together, numbers and charts, if you will, that are derived from numbers can be very, very powerful.

• 7:35Stephen J. Dubner?

  This was a power that Ballmer exercised fully at Microsoft.

• 7:40Speaker 01

  One of the most important contributions I think I actually made was helping to structure the full set of numbers that are available in a complicated business into a few simple kind of reports that people could read and know that if they focused on those, they'd understand the business and understand how to drive the business and improve performance. Okay, who's really buying PCs? How many are going to schools? How many are going into consumer hands? How many are going into smaller businesses and larger businesses? Because each of those represent different kinds of opportunities that need to be mined in different way. So the numbers tell the story that can direct action, can help put things in context, et cetera.

• 8:21Stephen J. Dubner?

  Using numbers to put things in context, telling a story that can direct action. That's the kind of thing we try to do on Freakonomics Radio. Seems pretty sensible, doesn't it? But there are some realms in which numbers, rather than being used to contextualize or illuminate a situation,

• 8:42Stephen J. Dubner?

  They're used to exaggerate or obfuscate. You know what I'm talking about. Realms like public safety.

• 8:49Speaker 04

  The murder rate in our country is the highest it's been in 47 years, right? Did you know that?

• 8:54Stephen J. Dubner?

  Actually, it's not. But also realms like the state of the economy. The Dow blew past the 20,000 mark Wednesday morning. And realms like government spending.

• 9:05Speaker 01

  I thought it would be interesting to paint government and what it does and what it takes in from its citizens, what it puts out and what kind of outcomes it gets, not by adjectives, but by the numbers.

• 9:20Stephen J. Dubner?

  The resulting portrait at USAFacts.org synthesizes 30 years' worth of data from federal, state, and local governments. All in, government takes in annual revenues of about $5.2 trillion and spends $5.4 trillion.

• 9:36Speaker 01

  If I'm a citizen, I don't want to know just where the government got its money, from whom, and where it spent it. But is it working at all? Or at least, what activity is it generating? You know, there are a lot of teachers in this country. And a lot of what government does is to teach. That's the biggest profession, be it at the higher ed level or at the K through 12 level.

• 9:58Stephen J. Dubner?

  To be precise, 10,979,260 public employees work in education.

• 10:05Speaker 01

  And it's a large amount of money. It's over $700 billion. It's about 15% of what the government spends overall. And you say, okay, for $700 billion, do we like? And then we give you the historical context. Do we like with the ramp up in spending? Because education spending has grown faster than spending overall. Do we like the kind of outcomes we're getting? And you see something like 30 or 40% of kids are proficient at grade level in 4th grade reading. That doesn't sound good enough.

• 10:35Stephen J. Dubner?

  I know you've been very outspoken that this is a nonpartisan, non-policy-oriented project, but I'm guessing there are many instances where you see something, whether it's about the number of educators and the ROI on education, or the rise in healthcare expenditures, something like 1,200% over the past 35 years. And I'm guessing that all of these things have to trigger some thoughts in your mind about, well, now that I know this, we should probably think about doing that.

• 11:05Speaker 01

  Well, what I would say in general is I do believe in the democratic process in the sense that my voice or my opinion is one in a sea of 330 million opinions, not all of whom could vote, but nonetheless, it's one in a sea of opinions. And the most important thing I can do here is ground in the facts as opposed to have an opinion on every topic and the numbers. That's up to folks to draw their own conclusions. There are a couple of things that really are on my mind, both from reading this and other work I'm doing with my wife. I am a business person still in my heart, if you will, and the notion of running deficits

• 11:48Speaker 01

  every year doesn't seem sustainable to me. And reasonable people can disagree about that, actually. Economists on both sides will have opinions on that. But I do look at this and say, hmm, I'm not sure how it should get better. There's a variety of ways in which that might close. The democratic process will have to be part of driving that, but I worry about that as a long-term overhang on our kids. I think we showed that the total value of assets held by American households is, call it about 88 trillion, and the amount of debt held by the public's about 15 trillion. It's a way to think about it. We own 88 trillion dollars worth of stuff and we owe 15 trillion of it back out.

• 12:32Speaker 01

  It's just a way to sort of say, hmm, what's the scale of our debt? How will that change over time? But you can increase taxes, you can reduce expenditures. That's something that's got to be worked out in the democratic process. I'm silent on the topic.

• 12:49Stephen J. Dubner?

  Ballmer and his team modeled USA Facts on the 10K report that public companies file with the SEC to lay bare their financial and organizational details. Well, if not lay them bare, at least give investors a chance to gauge the company's well-being.

• 13:07Stephen J. Dubner?

  How surprised were you that a 10K for the US government didn't already exist?

• 13:13Speaker 01

  Well, I guess I was pretty surprised when I got started. Maybe not that that didn't exist, but that very little that was integrated and complete and coherent existed. Whether it existed exactly in a 10K format or not, the notion that said, hey, look, we really want to see these numbers in context of one another. Well, there are things you can look at for the federal budget, but it doesn't factor in state and local. And yet, you know, I look out my window here and most of the roads were built with some combination of state, federal, and local money. So how can you look at just one element? So the notion that there was nothing holistic across state, federal, and local surprised me.

• 13:55Speaker 01

  The notion that the federal government didn't even consolidate its stuff into sort of a coherent whole probably didn't surprise me because, you know, people tend to organize by stovepipes, you know, cabinet departments or whatever. And it's hard unless somebody's chartered to really bring everything together and tell a story.

• 14:16Stephen J. Dubner?

  So how did your picture, mental image, of the US overall change as a result of this?

• 14:23Speaker 01

  Yeah, I guess I knew that Medicare and Social Security were a big deal, but not by the numbers. Did I really understand how big a deal they are in terms of kind of what government does? I call those savings programs because you're laying away money for either your health or the rest of your living in retirement. And the degree to which, by the numbers, if you will, the government is involved in essentially helping people save. I guess on the theory that people wouldn't save on their own. And through Social Security and Medicare, there's also a degree of wealth transfer, which I think everybody can form their own point of view, whether that's a good thing or not. But there is both wealth transfer and savings going on.

• 15:07Speaker 01

  And that is a much larger thing than, I guess, I even knew despite the fact that it was kind of in my blood, but the numbers sort of brought that clear.

• 15:21Stephen J. Dubner?

  In a TEDx talk introducing USA facts, Ballmer explained his views on philanthropy. While his wife had long been engaged in philanthropy, he hadn't caught the bug. He felt that being a law-abiding, tax-paying citizen essentially was being a philanthropist, sending the government money that they distribute on your behalf. I asked him what changed that view.

• 15:42Speaker 01

  You certainly can find communities of kids that when they're born and they're born poor, the likelihood is super, super, super high they stay poor, i.e. they just don't have much of a shot. That's not okay. And no matter what government's doing, that hasn't gotten better. That is a pocket where it will take something other than business as usual by government and philanthropy must... private citizens, not forget philanthropy, private citizens must have a role and that would be an example. It turns out philanthropy cannot solve these issues for kids who are born without opportunity, but philanthropy can help fill in the gaps around the things the government does and philanthropy can help test out and prove things

• 16:25Speaker 01

  before government's willing to invest. But philanthropy does have to influence government action if all kids in America are going to get a real chance at the American dream.

• 16:35Stephen J. Dubner?

  But it does seem that there are a lot of wealthy, well-intentioned and really informed people in this space. I mean, look, we could just take former Microsoft people and that's already a lot of wealthy, well-intentioned and empirically-driven people in this space. And I know there's been progress, but you know, you talk about philanthropy serving a role of discovery, of better methodology, better ROI and so on, but it's still the government that in a lot of cases, especially education, as you pointed out, that is essentially doing the thing, right? Whether it's transportation, policing, teaching and so on. And it seems as though the leverage that exists

• 17:19Stephen J. Dubner?

  between, let's say, the philanthropic community and policy enactment...

• 17:24Stephen J. Dubner?

  That that leverage has not grown, even though there's more and more, you know, good work in that space. So do you see this as being really a viable way to influence policy? Or, you know, I don't want to say it's just, you know, guilt assuasion. I don't mean to be, you know, negative about it like that, but it doesn't seem as though we're working toward better government and/or policymaking methodology. That's, that's my fear.

• 17:49Speaker 01

  First of all, I think it's probably important to say that there's a bunch of nonprofits out there who are doing very good work, but most of their funding does come actually from government. Most of the not-for-profits in the social service sector would have greater than 50% of their revenue coming from government. But government money doesn't really cover full overhead. It's very hard for them to exist, and they do need to fill in overhead with philanthropic dollars, despite the fact they're being driven by government. There's a role for philanthropy. It's not a highly leveraged role, but it's a very important role. So there'd be number one. Number two, we have certainly found that one organization

• 18:32Speaker 01

  we really love called Strive Together, but essentially not-for-profit intermediaries that form in communities and bring the schools, potentially the police, transportation authority together to look at these issues as a community issue and try to say, how do we focus as a group on improving outcomes for kids, particularly educational outcomes, because those are the best proxy for measuring a chance at opportunity. Last, but not least, is a set of programs that my wife really has gotten excited about, under the rubric of what they call pay for success. Most not-for-profits today, for their work, get paid for activity,

• 19:13Speaker 01

  not outcomes. And there is a view that the only way to sort of bootstrap government changing its procurement policies is to have private sector, that is philanthropic resources, help stimulate these kinds of contracts, give government a little bit of what I'd call the venture capital money to try them out and move forward.

• 19:32Stephen J. Dubner?

  I hear bits and pieces of that pay for success model now and again, very, you know, few and far between. Can you give a couple of examples of where you've heard that working well?

• 19:41Speaker 01

  Yeah, no, they are few and far between. That doesn't mean they should be given up on. There was one that was done, you know, with recidivism on people in prison in Rikers Island. That's one of the sort of celebrated, notable, probably works, but might not work cases, where essentially people are getting paid by the success in keeping people back out of, I guess Rikers is a jail, not a prison. Pre-K education in Salt Lake City, there's a program there to pay the providers based upon how well the kids actually perform in school when they get out of the pre-K system, as opposed to just the number of kids who go through their pre-K programs. That one has worked, I think, quite, quite well.

• 20:25Speaker 01

  But if you look in aggregate, no, they haven't. On the other hand, if you say not-for-profits are largely funded by government dollars, which is true, then you certainly would think it's worth putting some time and energy into improving the procurement practices from that community, just as the government would put effort into improving the procurement practices in the defense sector or anything else.

• 20:51Stephen J. Dubner?

  Is it hard for you to adjust to the nonprofit, you know, mindset or mindsets, coming from a very for-profit environment driven by, you know, quarterly earnings and share price to an environment where it's hard to go out of business as a nonprofit? Is that tough for you to either adjust or to get them to adjust to your mindset?

• 21:12Speaker 01

  Well, nonprofits can go out of business. Government can't go out of business, but the nonprofits can. I would say the big issue is almost similar to the issue that we try to try to provide a, at least a stab at with USA Facts, which is how do you think about outcomes? Because in government or in the not-for-profit sector, it's nice to talk about money in and money out, but you really want to talk about the outcomes. You know, are we educating our children better? When you talk to, you know, say, a not-for-profit that's involved in helping kids 16 to 24 who are out of the workforce get back into the workforce, you want to measure successful placements of people. People who last in their jobs a couple of years. And how do you get the data? How do you measure it?

• 21:57Speaker 01

  How do you get the not for profit focused in on it? How do you get the government funding to match up with it? But the problem is, first and foremost, what's the right way to measure the outcome? In a business, that's actually a relatively simple problem. The outcome is profit. You have shareholders who expect it. That's tougher in the social service and government sectors.

• 22:16Stephen J. Dubner?

  Yeah, maybe that's why we love sports so much. The outcomes are so evident, right?

• 22:20Speaker 01

  It is one thing. I mean, I ran Microsoft, very accountable business. And you don't learn about, you know, real tough accountability until you get into sports. The game is won, the game is lost. That's simple. The season's over or it's not.

• 22:36Stephen J. Dubner?

  You thought you knew binary from Microsoft. This is binary. It's win or lose, right?

• 22:41Speaker 01

  It's totally binary.

• 22:46Stephen J. Dubner?

  Coming up on Freakonomics Radio, Steve Ballmer's totally binary experience as the owner of a professional basketball team.

• 22:53Speaker 01

  Or our fans start getting angry and calling for heads, including mine.

• 22:57Stephen J. Dubner?

  And how Microsoft failed to anticipate the exodus from PCs to smartphones. That's coming up right after this break.

• 23:20Stephen J. Dubner?

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• 24:05Stephen J. Dubner?

  offers or go to quince.com/freak. Get free shipping on your order and 365-day returns. Now available in Canada and the UK, too. That's Q-U-I-N-C-E.com/freak.

• 24:24Stephen J. Dubner?

  Freakonomics Radio is sponsored by PNC Bank. Boring, great word, bad rep. Yet, time and time again, here at Freakonomics, we find that when something culture-changing happens, boring things like calculations and careful planning are usually behind it. Which begs the question, why not apply it to other aspects of life? Like banking, for example? Well, PNC Bank did since its inception, proving time and again that the best banking strategy isn't the exciting type, but the steady, reliable, definitely-not-yolo type. PNC Bank. Brilliantly boring since 1865. Brilliantly boring since 1865 is a registered mark of the PNC Financial Services Group, Inc. PNC Bank, National Association, Member FDIC.

• 25:12Stephen J. Dubner?

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• 25:46Speaker 01

  How much do you love golf? I really love golf. My first year I retired, I played 100 rounds, just to give you a scale. And then I've lightened up since then, other things to do.

• 25:59Stephen J. Dubner?

  Among the other things Steve Ballmer does, philanthropy, shepherding his new website, USAfacts.org, and taking care of a little trinket he bought for himself after leaving Microsoft.

• 26:11Speaker 05

  The $2 billion sale of the Los Angeles Clippers to former Microsoft CEO Steve Ballmer was finalized Tuesday.

• 26:17Stephen J. Dubner?

  The price Ballmer paid was nearly four times what the Clippers had been valued at, but he expressed no regret and he was happy to spend more money on top-tier players. Last year, the Clippers so far exceeded the NBA's salary cap that Ballmer had to pay nearly $20 million in luxury tax. That was second only to the Cleveland Cavaliers' $54 million luxury tax. But the Cavs got an NBA championship out of it. The Clippers haven't gotten past the Western Conference semifinals.

• 26:52Speaker 01

  We had an exciting season that ended too quickly, but we get a chance in our offseason to tune up our team for next basketball season.

• 27:00Stephen J. Dubner?

  Now, there does seem to be a pattern with the Clippers here, Steve, which is that you perform well in the season, get to the playoffs with high expectations, and then don't advance. So this is obviously a very different kind of business than running Microsoft, but you had to be pretty diagnostic back in the day with Microsoft. What about now trying to apply that diagnostic hat to a basketball team and the talent and the competition, all the things that go along with that? What do you see as needing to be done to get it to the next level?

• 27:29Speaker 01

  Well, first of all, we have a very good basketball team. Very, very good basketball team. Last year, both Blake Griffin and Chris Paul, two of our three superstars, were out. This year, we lost Blake Griffin in the playoffs. It's hard to fight, as they say, with one or two hands tied behind your back. But we have a very, very good basketball team. The goal, of course, is to continue to get better. And with the draft and with free agency, while we don't have draft picks, there's always a chance to wheel and deal a little bit, so to speak. Our goal this summer is to get better. Now, how do you do that? It turns out, there's a lot of complicated stuff. You have to be able to evaluate talent. You've got to be able to figure out this complicated math problem called the salary cap. So we've

• 28:11Speaker 01

  got our work cut out for us. We've got to get our key guys back. We've got to retool somewhat and come out, if you will, the end of the summer stronger. And I think that puts us in a good position, assuming we stay healthy next year.

• 28:25Stephen J. Dubner?

  Talk about hiring for a minute. Obviously, Microsoft, you were there for a long time and rose to CEO, which you served in for many years. I gather you were probably less involved in hiring as you went up the chain. But at a place like Microsoft with tens of thousands of employees versus a basketball team, the stakes are obviously much higher. Every choice you make has presumably a lot more leverage or a lot more consequences. I'm just curious what that's like for you.

• 28:52Speaker 01

  Yeah, well, of course, there's 150 some people at the LA Clippers, but there's about 15 people focused in on who actually play the game. And I am not a basketball expert. I won't pretend to be. In a sense, I think I have two contributions. One, I need to make sure we have the right talent running the operation with Doc Rivers, who's both coach and president of Basketball Ops, and a guy named Lawrence Frank, who's our general manager and EVP of Basketball Ops. I think we got the right talent. When it comes then to picking players, those guys really form the plan. I think I have a little bit of ability to help think through the math problem of how do you get capacity under the salary cap to go after people?

• 29:37Speaker 01

  What does that all look like? But at the end of the day, the selection of talent, I count on those guys to drive.

• 29:44Stephen J. Dubner?

  All right, be honest with me. You were notoriously famous for having a lot of fun at Microsoft. Anyone who doesn't know should watch videos of you jumping around, exhorting the troops, declaring how much you love the company.

• 30:00Speaker 01

  I love this company.

• 30:09Stephen J. Dubner?

  You were active to the point of perhaps hyperactive in your declaration of enthusiasm for that firm.

• 30:19Speaker 01

  Developers, developers, developers, developers, developers, developers.

• 30:24Stephen J. Dubner?

  And it seemed like you were having a blast. But be honest with me, is it much more fun, as I would assume and maybe wrongly, running a basketball team than running Microsoft?

• 30:35Speaker 01

  Hoopers, hoopers, hoopers. Yeah, it's a little more. Yeah, running a basketball team. I mean, running a basketball team. I own a basketball team. I actually have people who run the basketball team, which is, which is great. And, you know, in the case of Microsoft, you're really worrying every day about the future of the enterprise. Are you going to grow? Are the people that you recruited, you've got 100,000 people who work for you, are they going to, you know, have, be stable in their jobs? There's no question, basketball team's not going out of business. It really isn't. You can do better and you can do worse, but at the end of the day, it's not really about people's lives. Ex the players, where of course, there's always issues about who stays and who goes,

• 31:20Speaker 01

  and that's both the player's choice as well as the team's choice.

• 31:24Stephen J. Dubner?

  Well, we should say one reason it's not going out of business, just to get to the nitty gritty of it, is that you are lucky enough to belong to what some people might call a cartel, right? When you own a pro sports team, you own a piece of the league and, you know, only you guys get to decide if there's added competition in. Obviously, there's competition among the 30 or 32 teams, whatever the league, right? But that's a little bit weird, isn't it?

• 31:47Speaker 01

  Well, I think there's good reasons why, in this country at least, there's been sort of a clear regulatory framework with the sports leagues to promote the kind of competition and excitement that people want in the US. Will these teams go bankrupt? They can, but they're not going to go bankrupt next year, the year after. The TV contracts are by and large locked in. There's a fan base that's very exciting. It is a little bit different than launching a new product at Microsoft. You sort of hold your breath and say, we put billions into this thing and will anybody buy it? I mean, the Clippers, what's the worst case? We overpay on payroll, we pay a bunch of luxury tax, and we don't win a championship. Or our fans start getting angry and calling for heads, including mine, that say, come

• 32:32Speaker 01

  on, boys, we can win this thing. You know, I'm not saying that's fun, but, but it's a little different.

• 32:40Stephen J. Dubner?

  So when you look back at your entire experience at Microsoft, how do you, in a nutshell, which I realize is difficult, how do you look back and in your mind, describe that massive chapter in your life with all its subchapters? Just give me the kind of summary.

• 32:56Speaker 01

  Look, it's just sort of a dream to be involved in something like Microsoft in the sense of you go from having no place in the world to being this big, very important company. You go from a world in which technology is completely non-democratized, mainframes, blah, blah, blah, to a world in which technology is transforming the lives of basically everybody on the planet, where people are doing things they never dreamed possible through the power of the technology that the company produces. So both in terms of this journey of sort of creating this baby, which is now a very developed thing called Microsoft,

• 33:39Speaker 01

  and the baby that was the tech industry, the PC industry when I joined in 1980, to what is the full tech business today. And that's pretty cool stuff.

• 33:50Stephen J. Dubner?

  The year Apple released its first iPhone, 2007, you told USA Today, "There's no chance the iPhone is going to get any significant market share. No chance. It's a $500 subsidized item. They may make a lot of money, but if you actually look at the 1.3 billion phones that get sold, I'd prefer to have our software in 60 or 70 or 80% of them. Then I would have 2% or 3%, which is what Apple might get." Talk about, if you knew then, what you knew now about the smartphone market globally, and iPhones, obviously, a pretty good success in it, how you might have rethought that scenario.

• 34:23Speaker 01

  Well, there's two things. What would I have said differently? And what would I have thought differently? I mean, they're actually quite different. You know, a competitor comes out with a new product. I'm not gonna, I would, even now, probably not just say nice things about it. I think there's two or three key things that I missed. Number one... Apple did figure out a business model innovation in addition to the tech innovation, which was this notion of having phone companies subsidize the devices so they looked affordable. When the iPhone first came out, it did not look affordable. But with the subsidy model that they developed in conjunction with AT&T, they took a device that I didn't think would sell and they masked its real cost in a very strong and positive

• 35:07Speaker 01

  way into the monthly bill. And I think it was the business innovation I missed on top of the product. So we did not take the right path. So Apple did business model innovation. We tried too hard to keep our old model alive as opposed to moving to a new model, which we did later when we really got into the hardware business, but by then it was too late. I guess in the phone side, or at least the company decided when they shut down the Nokia thing, at least for now, to kind of reconsider and figure out a way back in later. But those were the things I felt like I missed and would do differently today.

• 35:49Stephen J. Dubner?

  The Nokia thing that Ballmer just mentioned? Around the time he retired, Microsoft finalized a deal to buy Nokia's phone business for more than $7 billion, but it didn't work out at all. Within a year, Microsoft's new CEO, Satya Nadella, wrote off the purchase and fired nearly 8,000 employees, removing Microsoft from the phone business. The Nokia purchase was yours. Talk about that for a minute and the outcome.

• 36:17Speaker 01

  Yeah, the Nokia purchase was sort of not mine by the time it got done. I recommended it to our board in June of 2013. Our board turned me down. I got kind of riled up about that topic, which I think has been chronicled in some and I didn't think it was handled well. It was one thing to turn me down, it was another thing the way it happened. So anyway, I was a little upset about it. But then, you know, after I made clear that it was time to go find a new leader, the board came back and said, let's go ahead and buy it. And by then they knew I was going to leave and they still wanted the Nokia purchase.

• 36:57Speaker 01

  So we got that done and somehow, I guess, the board and the company decided that they did not like the board's decision and shut the business down pretty quickly.

• 37:07Stephen J. Dubner?

  Do you or anyone in your family use any Apple products?

• 37:11Speaker 01

  We do now, since Microsoft's not in the phone business. I do have family members who use both Android devices and iPhones.

• 37:21Stephen J. Dubner?

  What about you?

• 37:24Speaker 01

  You know how we say with USA Facts, I'm nonpartisan, I'm all about the numbers.

• 37:30Speaker 01

  I'm sitting here with my Microsoft Surface open in front of me, looking down at Microsoft PowerPoint and Outlook. Yeah, come on, I'm diving the hole, man.

• 37:38Stephen J. Dubner?

  Let me ask you, I'm just curious, how much you care, or I guess, how do you care about Microsoft's future success?

• 37:48Speaker 01

  Well, when I ran Microsoft, I was always consistent in saying, the number one measure of whether I did a good job or not would be what Microsoft would look like 10 or 15 years after I left. And so, I can't do anything at this stage. You know, I'm just an outside, independent guy. On the other hand, of course, I'm rooting for the company for three reasons. I'm a shareholder, because it is the mark of whether I did a good job or not, and part of that is the succession plan. And oh, by the way, I got a lot of friends who work over there, and I think the world of.

• 38:25Stephen J. Dubner?

  All right, let me ask you some of what we call our frequently asked questions. If you, Steve Ballmer, had a time machine that could go either forward or back, where would you go and why?

• 38:37Speaker 01

  I think I would go back to about the late 1700s, early 1800s, to the time of the American Revolution and the French Revolution. And I'm sort of fascinated to kind of understand the dynamics. Reading a history book is sort of romantic. I wonder what it would have been like to see the birth of our country and to contrast it with what was going on in France. You know, there are other periods of time that, you know, what were things really like around the time of Christ? I'm Jewish, but I would have loved to see kind of how Christianity got born out of Judaism.

• 39:11Stephen J. Dubner?

  And interestingly, however, none of those picks are the future. Why is that?

• 39:16Speaker 01

  Well, I don't know, maybe I'm not being good enough to envision the future. Uh, or maybe I'm too afraid of what it would have. I don't know.

• 39:25Stephen J. Dubner?

  All right. What's one thing you've spent way too much on, but don't regret? And that may sound like I'm talking about money, but it could be, you know, spent too much time, spent too much effort, but something you've spent way too much on, but do not regret. Could also be a certain basketball team, I guess.

• 39:42Speaker 01

  Oh, I guess that right now I've spent way a lot of money and way a lot of time. I mean, shoot, I, this year I probably attended, I don't know, 80 or 90 basketball games, maybe more. Well, I have a kid who played high school basketball this year too. So you gotta add Clips games to that. Plus what I paid for the team. It would either be that or it'd be golf club memberships and timed on the golf course. And I don't regret it. I don't regret a second of either one.

• 40:09Stephen J. Dubner?

  All right. Now hang on a second. Um, 80 or 90 games, that means are you, do you go to most home games and some away games then for the Clippers?

• 40:16Speaker 01

  Almost every home game. I probably got 38 or 39 out of 41 this year. Plus I probably made about, uh, eight away games, plus playoffs, plus preseason, plus 20 odd games for my son.

• 40:30Stephen J. Dubner?

  Tell us something that most people, even if they think they know quite a bit about you, probably don't know about you.

• 40:36Speaker 01

  Uh, that I was super, super, super, super shy as a kid.

• 40:39Stephen J. Dubner?

  Is that right?

• 40:41Speaker 01

  If, uh, you know, somebody's father was home, I'd sit out in the car because I was just too nervous. I used to go to Hebrew school. My mom had to crack the window and get me to do breathing exercises so that I wouldn't lose it out of fear before I got to my Hebrew, uh, school classes. Uh, yeah, I was pretty painfully shy, uh, as a kid.

• 41:02Stephen J. Dubner?

  And, uh, how'd you get over it?

• 41:05Speaker 01

  You know, once I get sort of capable at things, then my confidence comes with capability. Uh, that got reset when I went to college. Again, I got nervous and then capability built. When I went to work at Procter and Gamble, my, my roommate, uh, friend of mine who started the same day, he said, it was kind of like shaking my hand. It was like shaking this very clammy thing because I was just so nervous to be there. And then as my capability grew, so did my confidence. Same thing when I got to business school, same thing when I got to Microsoft. It doesn't happen as much anymore, but there's still situations where I, I get pretty darn nervous.

• 41:41Stephen J. Dubner?

  What is one story that your family always tells about you?

• 41:46Speaker 01

  One story my family always tells about me. Well, I guess it's the story of how I am afraid, basically, of falling down. And I have been ever since I was a kid. My kids will tell you the story, not that they were there, but when I was five years old, I was afraid to walk down the hill, or six years old, maybe, in a game of capture the flag. And one of my dad's friends, who was an immigrant from Austria, Kuchen and Kuchen, showed me how to walk down the hill sideways so you wouldn't fall. My kids still call it, Dad, are you Sherman-ing it down the hill?

• 42:24Stephen J. Dubner?

  And did you get over that fear of falling? Did you get past that?

• 42:29Speaker 01

  I still go down the hill sideways sometimes.

• 42:41Stephen J. Dubner?

  That's it for today's show. Thanks for listening. And thanks to Steve Ballmer for, as always, holding nothing back. You can find his new project at USAFacts.org. Coming up next time on Freakonomics Radio, we all know the story about wealthy people, right?

• 42:57Speaker 06

  So, no, it's not just you. Science also agrees that the more money a person has, the more likely she is to be an inconsiderate, rude jerk.

• 43:06Stephen J. Dubner?

  But is that true? Are wealthy people truly more selfish? And how on earth could you scientifically measure this? Yeah, so for us, the results were quite shocking. What happens when an economist dresses up like a mail carrier and intentionally misdelivers envelopes with money in them to rich and poor households? That's next time on Freakonomics Radio. Freakonomics Radio is produced by WNYC Studios and Dubner Productions. This episode is produced by Christopher Wirth. Our staff also includes Shelley Lewis, Merritt Jacob, Greg Rosalsky, Stephanie Tam, Eliza Lambert, Alison Hockenberry, Emma Morgenstern, Harry Huggins, and Brian Gutierrez, with engineering help from Rick Kwan.

• 43:50Stephen J. Dubner?

  You can subscribe to Freakonomics Radio on Apple Podcasts or Stitcher or wherever you get it. Your podcast. You can also check out our entire archive at Freakonomics.com, where you can stream or download every episode we've ever made, or you can read the transcripts and look up the underlying research. We can also be found on Twitter, Facebook, et cetera, et cetera, or via email at [email protected].

• 44:34Stephen J. Dubner?

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• 45:07Stephen J. Dubner?

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• 45:38Stephen J. Dubner?

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• 46:15Speaker 07

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